Anuj
Your good question has no good answer. MFT goes to a country at the invitation of some local organisation. The understanding is that after the price calculations are done, a formal consent of both the reporting MFIs and the inviting host is obtained before publication of data. At times this formal consent is denied after seeing the pricing data!!!
Regards
Srinivasan
On 18-Mar-2015, at 6:08 PM, Anuj Jain ajain@stfx.ca [MicrofinancePractice] wrote:
> Srinivasan ji,
>
> Why is it up to the regulators to give permission to publish prices? One can understand the political ramifications, and hence regulators' and political power's hesitation in doing so. But does this have to be done with them? If the industry wishes to share their prices, can regulators have the mandate to regulate that? Should it not be consumers' right rather than regulator's prerogative?
>
> I realise I am asking a bit of rhetorical question. But pertinent, perhaps. S apologies in advance.
>
> Look forward to hear more.
>
> Anuj
>
> From: MicrofinancePractice@yahoogroups.com [mailto:MicrofinancePractice@yahoogroups.com]
> Sent: Wednesday, March 18, 2015 5:00 AM
> To: MicrofinancePractice@yahoogroups.com
> Subject: Re: [MFP] MicroFinance Transparency's transition plan
>
>
>
> Dear Dick, Chuck
> The surprise in resistance to transparent prices for me has been from some investors and industry networks. A positive surprise is the overwhelming response that MFT got from a large market - India. Disappointments have been where regulators did not want prices to be published after all the hardwork was done. Overall the feeling that "we are basically honest - but we will be transparent when the truth is convenient."
> Regards
> Srinivasan
> On 18 Mar 2015 12:58, "Chuck Waterfield waterfield@microfin.com<mailto:waterfield@microfin.com> [MicrofinancePractice]" <MicrofinancePractice@yahoogroups.com<mailto:MicrofinancePractice@yahoogroups.com>> wrote:
>
>
> Hello Dick,
>
> We'll be working on some analysis of the data to answer these sorts of questions, but I can tell you that in being part of the dialogue with 600 MFIs over the past 7 years there appears very little inverse correlation of transparency to legal issues but more the reverse. There tends to be more transparency in countries where transparency is an obligation (and you need some legal requirements for transparency if you have price caps).
>
> The choice to be transparent is more of an ethical decision when there are no laws demanding transparency. And then one's preference to be ethical gets fbound together with the reality that one's true prices are two, or three, or four times higher than what you have been telling the world. So an MFI can feel "We'd rather not lie, but we really don't want to tell the truth either." (There are interesting examples of MFIs who charge flat interest on their smallest loans and declining balance interest on their larger loan balances - it is hard to deny that this is anything but a way to make the price to the poorer clients not look so high.)
>
> I would say the biggest factor in the decision to be transparent or not is how big the difference is between what you say your price is and what your price really is. MFTransparency calculcates that and calls it the Transparency Index (where 100 is a perfectly transparent price). And, because those hidden prices tend to be very high prices, there is a secondary correlation between "really high prices" and "reluctance to be transparent".
>
> To see just how messy pricing can become, take a look at the data we collected on Ghana. This link gives you access to the full report, and I've posted an executive summary right here.
>
> http://www.mftransparency.org/resources/microfinance-pricing-report-ghana/
>
> Executive Summary
> · The institutional level Pricing Transparency Index ranges widely from 16 down to 99 in Ghana. Twenty-four products showed improvements in their Transparency Index between 2011 and 2013, while 18 products had less transparent prices.
> · Only a small minority of borrowers benefit from loans priced transparently as 2% of them receive loans which Transparency Index is above 75/100.
> · This low level of transparency is explained by pricing practices consisting of multiple price components: 95% of borrowers receive loans which incur interest calculated using a flat interest method; 95% of borrowers pay fees in addition to the interest rate; 70% of borrowers pay a compulsory insurance fee; and 84% must provide compulsory deposits. The few MFIs with a good Transparency Index use declining rates and a limited number of fees.
> · Microfinance pricing data collected in Ghana shows that the true prices increase on smaller loans. As true prices rise, the interest rate communicated to the borrower becomes less indicative of the true price and therefore, the corresponding Transparency Index value decreases. Inversely, larger and longer term loans are priced more transparently.
> In summary, what I say is that the industry has painted itself into a corner. Industry strategists advocated that hiding our prices would be a good thing. So many MFIs started hiding their prices. The world caught on to what they were doing, but reversing the process by relying on voluntary participation of MFIs is a very difficult and slow process and will never get universal participation.
>
> Chuck
>
>
> On Mar 18, 2015, at 1:24 AM, 'Meyer, Richard' meyer.19@osu.edu<mailto:meyer.19@osu.edu> [MicrofinancePractice] <MicrofinancePractice@yahoogroups.com<mailto:MicrofinancePractice@yahoogroups.com>> wrote:
>
>
> Chuck: Have you noticed if resistance to transparency has been greater in places where there are interest rate caps, so the MFIs have had to resort to many other types of fees to increase their yields and cover costs? Has it also been greater in countries where interest is a bad word or not permitted? Dick
>
>
> From: MicrofinancePractice@yahoogroups.com<mailto:MicrofinancePractice@yahoogroups.com> [mailto:MicrofinancePractice@yahoogroups.com]
> Sent: Tuesday, March 17, 2015 6:49 PM
> To: MFP
> Subject: [MFP] MicroFinance Transparency's transition plan
>
>
>
>
>
> Dear colleagues,
> We much appreciate the continual support many of you have given to MicroFinance Transparency since we launched in 2008. We have been inspired by the clear industry-wide commitment to the principles of transparent pricing. Thanks to all of us working together, the industry has made impressive progress over these 7 years – transparent pricing on 1,800 loan products sold by 530 MFIs to 52 million clients. Working together, we all accomplished more than expected, and to our knowledge we did more than any other industry to voluntarily practice pricing transparency.
> Yet the MFT board has asked me to communicate their decision that MFT's role in pricing transparency will be ending in a few months. Despite the broad desire to practice transparency, the successes we had did not come easily. Among MFIs, hesitation to participate and decisions to decline participation were common. The hurdles were many. For some, there was reluctance to be in the transparent minority; for others, there was fear of public criticism, the struggle to submit yet one more report to an external agency, and the challenge of understanding the technical nature of the requested information.
> In our last months, there are three final steps for MFT:
>
> * First, we are revising and documenting our pricing tools and releasing them to the industry so that others may use them. Our methodology can continue to be built into decision making and reporting procedures for funders, networks, raters, and analysts. However, new prices won't be published on the MFTransparency website. The industry will need to determine if there is any possible new home for any new data collected, or if that data will only be managed internally by the institutions collecting it.
> * Second, we are finishing our work on a new "Balanced Pricing Analysis" and will also make that available for organizations to incorporate into their evaluation and decision-making processes.
> * Finally, we are preparing a set of articles and reports that pulls together the rich lessons we have learned from seven years of collecting and studying pricing data.
> Again, we thank all of you for your support over the past years. Together we worked towards the organization's mission to be the leader in microfinance product pricing transparency by promoting public disclosure and education. Although much work remains, we see countless examples of positive change. We see pricing a major topic of conversation in every conference, where before it was never discussed and rarely understood. We have frequent examples of MFIs changing their pricing to make it more transparent. We have felt a part of the movement to recognize those MFIs committed to the hard decisions necessary to seek a price that balances the needs of their business with the needs of their clients. We will continue to work with you, even if not through MFT.
> Fond regards on behalf of the board and staff of MFTransparency,
>
> Chuck Waterfield
> CEO, MFTransparency
>
>
>
>
>
>
>
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Wednesday, March 18, 2015
Re: [MFP] MicroFinance Transparency's transition plan
Hello Mingyee,
Generally truth-in-lending legislation is to protect consumers from misleading pricing. The expectation is that businesses should know better. Lending and borrowing is assumed more of an exchange between knowledgable parties. If the MFI can't compare two loans from investors because of interest rates and fees, they have pretty poor management skills.
There is another layer of "transparency" that is often discussed for social investors - they are asked why they don't make public the prices that they charge on their loans. Then borrowers could shop around and compare prices (which is why investors avoid the transparency). Sellers have more power when prices are not transparent.
Chuck Waterfield
On Mar 18, 2015, at 5:15 PM, Hsu Ming-Yee mingyee0706@yahoo.fr [MicrofinancePractice] <MicrofinancePractice@yahoogroups.com> wrote:Dear all,On a sidenote: while all agree transparency is desirable, it seems that our focus is only on the price MFIs charge their customers. I have not seen many investment contracts, but I have the impression that it is rather common for investors to charge an arrangement fee, a commission, etc. besides loan interest on MFIs, without telling MFIs what the real rate is. Should microfinance investors not at least practice what they preach?Mingyee
From: "'Meyer, Richard' meyer.19@osu.edu [MicrofinancePractice]" <MicrofinancePractice@yahoogroups.com>
To: "MicrofinancePractice@yahoogroups.com" <MicrofinancePractice@yahoogroups.com>
Sent: Wednesday, March 18, 2015 9:10 PM
Subject: RE: [MFP] MicroFinance Transparency's transition planVery interesting and thanks for taking the time to reply. DickFrom: MicrofinancePractice@yahoogroups.com [mailto:MicrofinancePractice@yahoogroups.com]
Sent: Wednesday, March 18, 2015 3:28 AM
To: MFP
Subject: Re: [MFP] MicroFinance Transparency's transition plan
Hello Dick,We'll be working on some analysis of the data to answer these sorts of questions, but I can tell you that in being part of the dialogue with 600 MFIs over the past 7 years there appears very little inverse correlation of transparency to legal issues but more the reverse. There tends to be more transparency in countries where transparency is an obligation (and you need some legal requirements for transparency if you have price caps).The choice to be transparent is more of an ethical decision when there are no laws demanding transparency. And then one's preference to be ethical gets fbound together with the reality that one's true prices are two, or three, or four times higher than what you have been telling the world. So an MFI can feel "We'd rather not lie, but we really don't want to tell the truth either." (There are interesting examples of MFIs who charge flat interest on their smallest loans and declining balance interest on their larger loan balances - it is hard to deny that this is anything but a way to make the price to the poorer clients not look so high.)I would say the biggest factor in the decision to be transparent or not is how big the difference is between what you say your price is and what your price really is. MFTransparency calculcates that and calls it the Transparency Index (where 100 is a perfectly transparent price). And, because those hidden prices tend to be very high prices, there is a secondary correlation between "really high prices" and "reluctance to be transparent".To see just how messy pricing can become, take a look at the data we collected on Ghana. This link gives you access to the full report, and I've posted an executive summary right here.Executive Summary· The institutional level Pricing Transparency Index ranges widely from 16 down to 99 in Ghana. Twenty-four products showed improvements in their Transparency Index between 2011 and 2013, while 18 products had less transparent prices.· Only a small minority of borrowers benefit from loans priced transparently as 2% of them receive loans which Transparency Index is above 75/100.· This low level of transparency is explained by pricing practices consisting of multiple price components: 95% of borrowers receive loans which incur interest calculated using a flat interest method; 95% of borrowers pay fees in addition to the interest rate; 70% of borrowers pay a compulsory insurance fee; and 84% must provide compulsory deposits. The few MFIs with a good Transparency Index use declining rates and a limited number of fees.· Microfinance pricing data collected in Ghana shows that the true prices increase on smaller loans. As true prices rise, the interest rate communicated to the borrower becomes less indicative of the true price and therefore, the corresponding Transparency Index value decreases. Inversely, larger and longer term loans are priced more transparently.In summary, what I say is that the industry has painted itself into a corner. Industry strategists advocated that hiding our prices would be a good thing. So many MFIs started hiding their prices. The world caught on to what they were doing, but reversing the process by relying on voluntary participation of MFIs is a very difficult and slow process and will never get universal participation.ChuckOn Mar 18, 2015, at 1:24 AM, 'Meyer, Richard' meyer.19@osu.edu [MicrofinancePractice] <MicrofinancePractice@yahoogroups.com> wrote:Chuck: Have you noticed if resistance to transparency has been greater in places where there are interest rate caps, so the MFIs have had to resort to many other types of fees to increase their yields and cover costs? Has it also been greater in countries where interest is a bad word or not permitted? DickFrom: MicrofinancePractice@yahoogroups.com [mailto:MicrofinancePractice@yahoogroups.com]
Sent: Tuesday, March 17, 2015 6:49 PM
To: MFP
Subject: [MFP] MicroFinance Transparency's transition planDear colleagues,We much appreciate the continual support many of you have given to MicroFinance Transparency since we launched in 2008. We have been inspired by the clear industry-wide commitment to the principles of transparent pricing. Thanks to all of us working together, the industry has made impressive progress over these 7 years – transparent pricing on 1,800 loan products sold by 530 MFIs to 52 million clients. Working together, we all accomplished more than expected, and to our knowledge we did more than any other industry to voluntarily practice pricing transparency.Yet the MFT board has asked me to communicate their decision that MFT's role in pricing transparency will be ending in a few months. Despite the broad desire to practice transparency, the successes we had did not come easily. Among MFIs, hesitation to participate and decisions to decline participation were common. The hurdles were many. For some, there was reluctance to be in the transparent minority; for others, there was fear of public criticism, the struggle to submit yet one more report to an external agency, and the challenge of understanding the technical nature of the requested information.In our last months, there are three final steps for MFT:
- First, we are revising and documenting our pricing tools and releasing them to the industry so that others may use them. Our methodology can continue to be built into decision making and reporting procedures for funders, networks, raters, and analysts. However, new prices won't be published on the MFTransparency website. The industry will need to determine if there is any possible new home for any new data collected, or if that data will only be managed internally by the institutions collecting it.
- Second, we are finishing our work on a new "Balanced Pricing Analysis" and will also make that available for organizations to incorporate into their evaluation and decision-making processes.
- Finally, we are preparing a set of articles and reports that pulls together the rich lessons we have learned from seven years of collecting and studying pricing data.
Again, we thank all of you for your support over the past years. Together we worked towards the organization's mission to be the leader in microfinance product pricing transparency by promoting public disclosure and education. Although much work remains, we see countless examples of positive change. We see pricing a major topic of conversation in every conference, where before it was never discussed and rarely understood. We have frequent examples of MFIs changing their pricing to make it more transparent. We have felt a part of the movement to recognize those MFIs committed to the hard decisions necessary to seek a price that balances the needs of their business with the needs of their clients. We will continue to work with you, even if not through MFT.Fond regards on behalf of the board and staff of MFTransparency,Chuck WaterfieldCEO, MFTransparency
__._,_.___
Posted by: Chuck Waterfield <waterfield@microfin.com>
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.
__,_._,___
Re: [MFP] MicroFinance Transparency's transition plan
Dear all,
On a sidenote: while all agree transparency is desirable, it seems that our focus is only on the price MFIs charge their customers. I have not seen many investment contracts, but I have the impression that it is rather common for investors to charge an arrangement fee, a commission, etc. besides loan interest on MFIs, without telling MFIs what the real rate is. Should microfinance investors not at least practice what they preach?
Mingyee
From: "'Meyer, Richard' meyer.19@osu.edu [MicrofinancePractice]" <MicrofinancePractice@yahoogroups.com>
To: "MicrofinancePractice@yahoogroups.com" <MicrofinancePractice@yahoogroups.com>
Sent: Wednesday, March 18, 2015 9:10 PM
Subject: RE: [MFP] MicroFinance Transparency's transition plan
Very interesting and thanks for taking the time to reply. Dick
From: MicrofinancePractice@yahoogroups.com [mailto:MicrofinancePractice@yahoogroups.com]
Sent: Wednesday, March 18, 2015 3:28 AM
To: MFP
Subject: Re: [MFP] MicroFinance Transparency's transition plan
Sent: Wednesday, March 18, 2015 3:28 AM
To: MFP
Subject: Re: [MFP] MicroFinance Transparency's transition plan
Hello Dick,
We'll be working on some analysis of the data to answer these sorts of questions, but I can tell you that in being part of the dialogue with 600 MFIs over the past 7 years there appears very little inverse correlation of transparency to legal issues but more the reverse. There tends to be more transparency in countries where transparency is an obligation (and you need some legal requirements for transparency if you have price caps).
The choice to be transparent is more of an ethical decision when there are no laws demanding transparency. And then one's preference to be ethical gets fbound together with the reality that one's true prices are two, or three, or four times higher than what you have been telling the world. So an MFI can feel "We'd rather not lie, but we really don't want to tell the truth either." (There are interesting examples of MFIs who charge flat interest on their smallest loans and declining balance interest on their larger loan balances - it is hard to deny that this is anything but a way to make the price to the poorer clients not look so high.)
I would say the biggest factor in the decision to be transparent or not is how big the difference is between what you say your price is and what your price really is. MFTransparency calculcates that and calls it the Transparency Index (where 100 is a perfectly transparent price). And, because those hidden prices tend to be very high prices, there is a secondary correlation between "really high prices" and "reluctance to be transparent".
To see just how messy pricing can become, take a look at the data we collected on Ghana. This link gives you access to the full report, and I've posted an executive summary right here.
Executive Summary
· The institutional level Pricing Transparency Index ranges widely from 16 down to 99 in Ghana. Twenty-four products showed improvements in their Transparency Index between 2011 and 2013, while 18 products had less transparent prices.
· Only a small minority of borrowers benefit from loans priced transparently as 2% of them receive loans which Transparency Index is above 75/100.
· This low level of transparency is explained by pricing practices consisting of multiple price components: 95% of borrowers receive loans which incur interest calculated using a flat interest method; 95% of borrowers pay fees in addition to the interest rate; 70% of borrowers pay a compulsory insurance fee; and 84% must provide compulsory deposits. The few MFIs with a good Transparency Index use declining rates and a limited number of fees.
· Microfinance pricing data collected in Ghana shows that the true prices increase on smaller loans. As true prices rise, the interest rate communicated to the borrower becomes less indicative of the true price and therefore, the corresponding Transparency Index value decreases. Inversely, larger and longer term loans are priced more transparently.
In summary, what I say is that the industry has painted itself into a corner. Industry strategists advocated that hiding our prices would be a good thing. So many MFIs started hiding their prices. The world caught on to what they were doing, but reversing the process by relying on voluntary participation of MFIs is a very difficult and slow process and will never get universal participation.
Chuck
On Mar 18, 2015, at 1:24 AM, 'Meyer, Richard' meyer.19@osu.edu [MicrofinancePractice] <MicrofinancePractice@yahoogroups.com> wrote:Chuck: Have you noticed if resistance to transparency has been greater in places where there are interest rate caps, so the MFIs have had to resort to many other types of fees to increase their yields and cover costs? Has it also been greater in countries where interest is a bad word or not permitted? DickFrom: MicrofinancePractice@yahoogroups.com [mailto:MicrofinancePractice@yahoogroups.com]
Sent: Tuesday, March 17, 2015 6:49 PM
To: MFP
Subject: [MFP] MicroFinance Transparency's transition plan
Dear colleagues,We much appreciate the continual support many of you have given to MicroFinance Transparency since we launched in 2008. We have been inspired by the clear industry-wide commitment to the principles of transparent pricing. Thanks to all of us working together, the industry has made impressive progress over these 7 years – transparent pricing on 1,800 loan products sold by 530 MFIs to 52 million clients. Working together, we all accomplished more than expected, and to our knowledge we did more than any other industry to voluntarily practice pricing transparency.Yet the MFT board has asked me to communicate their decision that MFT's role in pricing transparency will be ending in a few months. Despite the broad desire to practice transparency, the successes we had did not come easily. Among MFIs, hesitation to participate and decisions to decline participation were common. The hurdles were many. For some, there was reluctance to be in the transparent minority; for others, there was fear of public criticism, the struggle to submit yet one more report to an external agency, and the challenge of understanding the technical nature of the requested information.In our last months, there are three final steps for MFT:
- First, we are revising and documenting our pricing tools and releasing them to the industry so that others may use them. Our methodology can continue to be built into decision making and reporting procedures for funders, networks, raters, and analysts. However, new prices won't be published on the MFTransparency website. The industry will need to determine if there is any possible new home for any new data collected, or if that data will only be managed internally by the institutions collecting it.
- Second, we are finishing our work on a new "Balanced Pricing Analysis" and will also make that available for organizations to incorporate into their evaluation and decision-making processes.
- Finally, we are preparing a set of articles and reports that pulls together the rich lessons we have learned from seven years of collecting and studying pricing data.
Again, we thank all of you for your support over the past years. Together we worked towards the organization's mission to be the leader in microfinance product pricing transparency by promoting public disclosure and education. Although much work remains, we see countless examples of positive change. We see pricing a major topic of conversation in every conference, where before it was never discussed and rarely understood. We have frequent examples of MFIs changing their pricing to make it more transparent. We have felt a part of the movement to recognize those MFIs committed to the hard decisions necessary to seek a price that balances the needs of their business with the needs of their clients. We will continue to work with you, even if not through MFT.Fond regards on behalf of the board and staff of MFTransparency,Chuck WaterfieldCEO, MFTransparency
__._,_.___
Posted by: Hsu Ming-Yee <mingyee0706@yahoo.fr>
| Reply via web post | • | Reply to sender | • | Reply to group | • | Start a New Topic | • | Messages in this topic (13) |
WARNING! If you hit REPLY, your message will go to the entire listserve, not just the original author!
.
__,_._,___
RE: [MFP] MicroFinance Transparency's transition plan
Very interesting and thanks for taking the time to reply. Dick
From: MicrofinancePractice@yahoogroups.com [mailto:MicrofinancePractice@yahoogroups.com]
Sent: Wednesday, March 18, 2015 3:28 AM
To: MFP
Subject: Re: [MFP] MicroFinance Transparency's transition plan
Hello Dick,
We'll be working on some analysis of the data to answer these sorts of questions, but I can tell you that in being part of the dialogue with 600 MFIs over the past 7 years there appears very little inverse correlation of transparency to legal issues but more the reverse. There tends to be more transparency in countries where transparency is an obligation (and you need some legal requirements for transparency if you have price caps).
The choice to be transparent is more of an ethical decision when there are no laws demanding transparency. And then one's preference to be ethical gets fbound together with the reality that one's true prices are two, or three, or four times higher than what you have been telling the world. So an MFI can feel "We'd rather not lie, but we really don't want to tell the truth either." (There are interesting examples of MFIs who charge flat interest on their smallest loans and declining balance interest on their larger loan balances - it is hard to deny that this is anything but a way to make the price to the poorer clients not look so high.)
I would say the biggest factor in the decision to be transparent or not is how big the difference is between what you say your price is and what your price really is. MFTransparency calculcates that and calls it the Transparency Index (where 100 is a perfectly transparent price). And, because those hidden prices tend to be very high prices, there is a secondary correlation between "really high prices" and "reluctance to be transparent".
To see just how messy pricing can become, take a look at the data we collected on Ghana. This link gives you access to the full report, and I've posted an executive summary right here.
Executive Summary
· The institutional level Pricing Transparency Index ranges widely from 16 down to 99 in Ghana. Twenty-four products showed improvements in their Transparency Index between 2011 and 2013, while 18 products had less transparent prices.
· Only a small minority of borrowers benefit from loans priced transparently as 2% of them receive loans which Transparency Index is above 75/100.
· This low level of transparency is explained by pricing practices consisting of multiple price components: 95% of borrowers receive loans which incur interest calculated using a flat interest method; 95% of borrowers pay fees in addition to the interest rate; 70% of borrowers pay a compulsory insurance fee; and 84% must provide compulsory deposits. The few MFIs with a good Transparency Index use declining rates and a limited number of fees.
· Microfinance pricing data collected in Ghana shows that the true prices increase on smaller loans. As true prices rise, the interest rate communicated to the borrower becomes less indicative of the true price and therefore, the corresponding Transparency Index value decreases. Inversely, larger and longer term loans are priced more transparently.
In summary, what I say is that the industry has painted itself into a corner. Industry strategists advocated that hiding our prices would be a good thing. So many MFIs started hiding their prices. The world caught on to what they were doing, but reversing the process by relying on voluntary participation of MFIs is a very difficult and slow process and will never get universal participation.
Chuck
On Mar 18, 2015, at 1:24 AM, 'Meyer, Richard' meyer.19@osu.edu [MicrofinancePractice] <MicrofinancePractice@yahoogroups.com> wrote:
Chuck: Have you noticed if resistance to transparency has been greater in places where there are interest rate caps, so the MFIs have had to resort to many other types of fees to increase their yields and cover costs? Has it also been greater in countries where interest is a bad word or not permitted? Dick
From: MicrofinancePractice@yahoogroups.com [mailto:MicrofinancePractice@yahoogroups.com]
Sent: Tuesday, March 17, 2015 6:49 PM
To: MFP
Subject: [MFP] MicroFinance Transparency's transition plan
Dear colleagues,
We much appreciate the continual support many of you have given to MicroFinance Transparency since we launched in 2008. We have been inspired by the clear industry-wide commitment to the principles of transparent pricing. Thanks to all of us working together, the industry has made impressive progress over these 7 years – transparent pricing on 1,800 loan products sold by 530 MFIs to 52 million clients. Working together, we all accomplished more than expected, and to our knowledge we did more than any other industry to voluntarily practice pricing transparency.
Yet the MFT board has asked me to communicate their decision that MFT's role in pricing transparency will be ending in a few months. Despite the broad desire to practice transparency, the successes we had did not come easily. Among MFIs, hesitation to participate and decisions to decline participation were common. The hurdles were many. For some, there was reluctance to be in the transparent minority; for others, there was fear of public criticism, the struggle to submit yet one more report to an external agency, and the challenge of understanding the technical nature of the requested information.
In our last months, there are three final steps for MFT:
- First, we are revising and documenting our pricing tools and releasing them to the industry so that others may use them. Our methodology can continue to be built into decision making and reporting procedures for funders, networks, raters, and analysts. However, new prices won't be published on the MFTransparency website. The industry will need to determine if there is any possible new home for any new data collected, or if that data will only be managed internally by the institutions collecting it.
- Second, we are finishing our work on a new "Balanced Pricing Analysis" and will also make that available for organizations to incorporate into their evaluation and decision-making processes.
- Finally, we are preparing a set of articles and reports that pulls together the rich lessons we have learned from seven years of collecting and studying pricing data.
Again, we thank all of you for your support over the past years. Together we worked towards the organization's mission to be the leader in microfinance product pricing transparency by promoting public disclosure and education. Although much work remains, we see countless examples of positive change. We see pricing a major topic of conversation in every conference, where before it was never discussed and rarely understood. We have frequent examples of MFIs changing their pricing to make it more transparent. We have felt a part of the movement to recognize those MFIs committed to the hard decisions necessary to seek a price that balances the needs of their business with the needs of their clients. We will continue to work with you, even if not through MFT.
Fond regards on behalf of the board and staff of MFTransparency,
Chuck Waterfield
CEO, MFTransparency
__._,_.___
Posted by: "Meyer, Richard" <meyer.19@osu.edu>
| Reply via web post | • | Reply to sender | • | Reply to group | • | Start a New Topic | • | Messages in this topic (12) |
WARNING! If you hit REPLY, your message will go to the entire listserve, not just the original author!
.
__,_._,___
Re: [MFP] MicroFinance Transparency's transition plan
Dear All,
Best,
Jami Solli
On Wed, Mar 18, 2015 at 8:38 AM, Anuj Jain ajain@stfx.ca [MicrofinancePractice] <MicrofinancePractice@yahoogroups.com> wrote:
Srinivasan ji,
Why is it up to the regulators to give permission to publish prices? One can understand the political ramifications, and hence regulators' and political power's hesitation in doing so. But does this have to be done with them? If the industry wishes to share their prices, can regulators have the mandate to regulate that? Should it not be consumers' right rather than regulator's prerogative?
I realise I am asking a bit of rhetorical question. But pertinent, perhaps. S apologies in advance.
Look forward to hear more.
Anuj
From: MicrofinancePractice@yahoogroups.com [mailto:MicrofinancePractice@yahoogroups.com]
Sent: Wednesday, March 18, 2015 5:00 AM
To: MicrofinancePractice@yahoogroups.com
Subject: Re: [MFP] MicroFinance Transparency's transition plan
Dear Dick, Chuck
The surprise in resistance to transparent prices for me has been from some investors and industry networks. A positive surprise is the overwhelming response that MFT got from a large market - India. Disappointments have been where regulators did not want prices to be published after all the hardwork was done. Overall the feeling that "we are basically honest - but we will be transparent when the truth is convenient."
Regards
SrinivasanOn 18 Mar 2015 12:58, "Chuck Waterfield waterfield@microfin.com [MicrofinancePractice]" <MicrofinancePractice@yahoogroups.com> wrote:
Hello Dick,
We'll be working on some analysis of the data to answer these sorts of questions, but I can tell you that in being part of the dialogue with 600 MFIs over the past 7 years there appears very little inverse correlation of transparency to legal issues but more the reverse. There tends to be more transparency in countries where transparency is an obligation (and you need some legal requirements for transparency if you have price caps).
The choice to be transparent is more of an ethical decision when there are no laws demanding transparency. And then one's preference to be ethical gets fbound together with the reality that one's true prices are two, or three, or four times higher than what you have been telling the world. So an MFI can feel "We'd rather not lie, but we really don't want to tell the truth either." (There are interesting examples of MFIs who charge flat interest on their smallest loans and declining balance interest on their larger loan balances - it is hard to deny that this is anything but a way to make the price to the poorer clients not look so high.)
I would say the biggest factor in the decision to be transparent or not is how big the difference is between what you say your price is and what your price really is. MFTransparency calculcates that and calls it the Transparency Index (where 100 is a perfectly transparent price). And, because those hidden prices tend to be very high prices, there is a secondary correlation between "really high prices" and "reluctance to be transparent".
To see just how messy pricing can become, take a look at the data we collected on Ghana. This link gives you access to the full report, and I've posted an executive summary right here.
Executive Summary
· The institutional level Pricing Transparency Index ranges widely from 16 down to 99 in Ghana. Twenty-four products showed improvements in their Transparency Index between 2011 and 2013, while 18 products had less transparent prices.
· Only a small minority of borrowers benefit from loans priced transparently as 2% of them receive loans which Transparency Index is above 75/100.
· This low level of transparency is explained by pricing practices consisting of multiple price components: 95% of borrowers receive loans which incur interest calculated using a flat interest method; 95% of borrowers pay fees in addition to the interest rate; 70% of borrowers pay a compulsory insurance fee; and 84% must provide compulsory deposits. The few MFIs with a good Transparency Index use declining rates and a limited number of fees.
· Microfinance pricing data collected in Ghana shows that the true prices increase on smaller loans. As true prices rise, the interest rate communicated to the borrower becomes less indicative of the true price and therefore, the corresponding Transparency Index value decreases. Inversely, larger and longer term loans are priced more transparently.
In summary, what I say is that the industry has painted itself into a corner. Industry strategists advocated that hiding our prices would be a good thing. So many MFIs started hiding their prices. The world caught on to what they were doing, but reversing the process by relying on voluntary participation of MFIs is a very difficult and slow process and will never get universal participation.
Chuck
On Mar 18, 2015, at 1:24 AM, 'Meyer, Richard' meyer.19@osu.edu [MicrofinancePractice] <MicrofinancePractice@yahoogroups.com> wrote:
Chuck: Have you noticed if resistance to transparency has been greater in places where there are interest rate caps, so the MFIs have had to resort to many other types of fees to increase their yields and cover costs? Has it also been greater in countries where interest is a bad word or not permitted? Dick
From: MicrofinancePractice@yahoogroups.com [mailto:MicrofinancePractice@yahoogroups.com]
Sent: Tuesday, March 17, 2015 6:49 PM
To: MFP
Subject: [MFP] MicroFinance Transparency's transition plan
Dear colleagues,
We much appreciate the continual support many of you have given to MicroFinance Transparency since we launched in 2008. We have been inspired by the clear industry-wide commitment to the principles of transparent pricing. Thanks to all of us working together, the industry has made impressive progress over these 7 years – transparent pricing on 1,800 loan products sold by 530 MFIs to 52 million clients. Working together, we all accomplished more than expected, and to our knowledge we did more than any other industry to voluntarily practice pricing transparency.
Yet the MFT board has asked me to communicate their decision that MFT's role in pricing transparency will be ending in a few months. Despite the broad desire to practice transparency, the successes we had did not come easily. Among MFIs, hesitation to participate and decisions to decline participation were common. The hurdles were many. For some, there was reluctance to be in the transparent minority; for others, there was fear of public criticism, the struggle to submit yet one more report to an external agency, and the challenge of understanding the technical nature of the requested information.
In our last months, there are three final steps for MFT:
- First, we are revising and documenting our pricing tools and releasing them to the industry so that others may use them. Our methodology can continue to be built into decision making and reporting procedures for funders, networks, raters, and analysts. However, new prices won't be published on the MFTransparency website. The industry will need to determine if there is any possible new home for any new data collected, or if that data will only be managed internally by the institutions collecting it.
- Second, we are finishing our work on a new "Balanced Pricing Analysis" and will also make that available for organizations to incorporate into their evaluation and decision-making processes.
- Finally, we are preparing a set of articles and reports that pulls together the rich lessons we have learned from seven years of collecting and studying pricing data.
Again, we thank all of you for your support over the past years. Together we worked towards the organization's mission to be the leader in microfinance product pricing transparency by promoting public disclosure and education. Although much work remains, we see countless examples of positive change. We see pricing a major topic of conversation in every conference, where before it was never discussed and rarely understood. We have frequent examples of MFIs changing their pricing to make it more transparent. We have felt a part of the movement to recognize those MFIs committed to the hard decisions necessary to seek a price that balances the needs of their business with the needs of their clients. We will continue to work with you, even if not through MFT.
Fond regards on behalf of the board and staff of MFTransparency,
Chuck Waterfield
CEO, MFTransparency
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